• Crypto taxes

A person has 3 activities
1. Researches crypto, blockchain and writes about findings; earns from content
2. Invests in crypto to hold assets long term (2-4 years); makes about 3 -10 trades every year to buy or sell assets as opportunity arise
3. Earns passive income on crypto assets owned, eg 7.5% per year on staking in Wallet app

How will this person be taxed? The person has no other activities besides the above...

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Asked 1 month ago in Income Tax

1. Income from business

2. As there is no specific law under income tax Act on treatment of gain or loss on sale of crypto assets. In your case it is taxable under the head capital gain.

3. taxable on realisation basis.

Vivek Kumar Arora
CA, Delhi
4222 Answers
399 Consultations

5.0 on 5.0

Hi

 

Crypto taxes are gray area in taxation.there are no clear rules or guidelines defining taxability for cryptocurrencies, which calls for specific clarification from the Income Tax (I-T) department.

investors will be liable to pay taxes on cryptocurrency investments.

 

Nature of investment

In regular income tax parlance, the taxation on cryptocurrencies should depend on the nature of investment -- whether it is held in the form of currency or in the form of assets

Profits from the sale of cryptocurrency can be taxed as business income if traded frequently, or as capital gains if held for investment purposes. However, one must note that, If considered as business income, then the profit can be taxed as per the applicable slab rate; but if it is held for investment purpose, then taxation can be the same as tax gain in the form of capital gains.

 

It also means that, if taxpayers used their investments within three years, then short-term capital gains according to the relevant tax slabs will be applicable. However, if the redemption happens post 3 years, then it can be treated as long-term capital gain and can be taxed at 20% with indexation.

 

Meanwhile, some experts believe that profits from cryptocurrencies can be treated as income from other sources. We can also consider profits from frequent trading as income from speculative business income. However, more details and discussion will be required to understand it better.

Karishma Chhajer
CA, Jodhpur
2439 Answers
27 Consultations

5.0 on 5.0

For the content it will be considered as his business/ professional income.

With regard to investing in crypto same shall be considered as capital gain and taxed as long term if held for 3 years and short term if held for less than that and taxed accordingly.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
3875 Answers
51 Consultations

5.0 on 5.0

1) The income will be assessed under the head : Income from Business or profession". 

2) The crypto assets are not treated as currency. Hence, they will be treated as other capital assets on the lines similar to the investments in shares and securities. Thus they may be taxed as short term or capital gains depending upon the period of holding. Regular trading activities will be assessed under the head "Income from business or profession"

3) Interest earned on crypto assets can be treated as other interest assessable under the head "Income from other sources".

Two issues of concern for your attention:

1) One word of caution regarding trading in crypto assets from one asset to another asset, instead of receiving money for the sale of crypto assets.  Section 269ST of the Income Tax Act prohibits receipt of an amount of  Rs 2 lakhs or more otherwise than by an account payee or through a banking channel. The objective of the section is to prohibit cash transactions to curtain black money but the wording of the section may invite the mischief of this section for sale of crypto assets in exchange of other crypto assets, say from bitcoins to Ethereum. 

2) El Salvador recognised Crypto currency as a valid legal tender for monetary transactions. It may therefore be construed as dealing in recognised foreign currency and you may need to comply with the regulatory issues concerning dealing in foreign currency transactions. 

Of course there are other grey areas like using foreign currency for purchase of crypto assets. You may need to take a cautious approach. 

B Vijaya Kumar
CA, Hyderabad
942 Answers
97 Consultations

5.0 on 5.0

As of now there are no clear guidelines so let's keep it on the same footing as shares:

1 if you do intra day trading it will be considered as business otherwise it's at your discretion to disclose it as business or not. It don't depend on volume.

 

I need to know more about the second issue.

Naman Maloo
CA, Jaipur
3875 Answers
51 Consultations

5.0 on 5.0

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